PCCN REview Committee LEtter

Response to the President's Commission on Carbon Neutrality (PCCN) Draft Report

From the Energy Club at Ross PCCN Review Committee

We appreciate the effort of the PCCN and recognize the progress this committee has made on the University of Michigan's (the University) journey towards carbon neutrality. While there are many encouraging and promising recommendations in the report, such as the emphasis on additionality and impact in Michigan, the report fails to put the University on a path to be the Leaders and Best in terms of achieving carbon neutrality.

Achieving carbon neutrality stands as a defining challenge for the University and all of humanity. It requires innovative solutions, technical rigor, and interdisciplinary work. However, this is not a new fight. The vast majority of the University's students were not alive when the United States President committed to stabilizing greenhouse gas emissions to combat climate change at the Rio Earth Summit in 1992. Inaction and apathy squandered valuable years while global temperatures and climate-induced disasters increased. The Energy Club at Ross PCCN Review Committee, selected for both our industry experience and desire to improve the University, identified several areas where the report could be improved to adequately address the urgent need for the University to achieve carbon neutrality:

  1. Improve implementation, accountability, and transparency measures
  2. Implement carbon pricing before 2025
  3. Eliminate Scope 2 emissions through Virtual Power Purchase Agreements by 2023 while increasing action to decarbonize the Michigan grid
  4. Set Scope 3 emissions targets by 2022
  5. Procure carbon offsets by 2022 and set maximum offset targets
  6. Increase the size of the Revolving Energy Fund (REF)
  7. Implement ESG metrics for endowment investment decisions

1. Implementation, Accountability, and Transparency

The University's carbon neutrality undertaking must emphasize timely implementation plans, coupled with increased accountability and transparency. It is critical that the responsible units start planning and implementing the recommended actions swiftly – the next steps should not be another series of feasibility studies that simply delay real progress (e.g. line 1279). In order to facilitate such a massive change in a short period, a project management office (PMO) should be constituted to support the proposed carbon neutrality leadership position. The PMO should formulate a high-level project plan, integrate detailed unit-level plans, ensure that the milestones from the plans are met on time, and facilitate regular reporting to the University community. The draft report should also recommend specific unit-level reporting, monitoring, and enforcement mechanisms to ensure that unit leaders meet their carbon neutrality targets.

2. Carbon Pricing

The recommended internal carbon pricing measure, in concert with the REF, offers a compelling mechanism for incentivizing and financing efficiency measures in existing buildings. However, the proposed five-year implementation timeline is too long. The carbon pricing system should mature (reach the full $50/MTCO2) at the latest contemporaneously with the Scope 1 and 2 goals of carbon neutrality by 2025 (including offsets) and preferably earlier to minimize the offsets required.

3. Scope 2 Emissions

While we appreciate the establishment of a Scope 2 carbon neutrality goal, we think that the University should do more to leverage its clout and purchasing power within the state of Michigan and take on a more active role in decarbonizing the state's power supply at a broader scale and on a faster timeline. We understand the need to pursue stopgap measures such as Virtual Power Purchase Agreements (VPPAs) in the immediate term; however, achieving Scope 2 carbon neutrality through these means can be accomplished by 2023 instead of 2025 given current rates of project development. Furthermore, the projects developed through VPPAs could be located in Michigan to boost renewable energy jobs in the state. In parallel, the University must actively utilize its political capital to advocate for faster change at the utility and state levels. For example, this can take the form of lobbying the Michigan Public Service Commission for further deregulation of the power sector to allow front-of-the meter Power Purchase Agreements along with other regulatory policies to improve the viability of utility-scale renewable projects in the state. Additionally, the University should do more to independently increase renewable generation in Michigan, such as setting specific targets for distributed energy resources (DERs) on campus, including standalone solar + storage installations and mandated rooftop solar on new buildings.

4. Scope 3 Targets

Our review committee was disappointed by the recommendation to delay setting Scope 3 emissions goals until 2025. While these emissions are more ambiguous due to the University's lack of control over them, that should not prevent goals from being established, since goals will help to spur innovative ideas. We have already fallen behind institutions such as the Ohio State University, Duke, and Yale, which have included Scope 3 emissions in their sustainability strategies (see Figure 8). Our recommendation is that the University should establish Scope 3 emissions targets by 2022 (including purchased goods), while simultaneously beginning the food and travel emissions estimates.

5. Carbon Offsets

We appreciate the Commission's acknowledgement of the limited role offsets should play in a carbon neutrality plan. Two key issues remain regarding the use of offsets. First, 2025 is unnecessarily long for assessing and procuring credible offsets, especially given the Commission's clear guidelines for determining offset quality. Unless delaying offsets can realize additional benefits for the local community, offsets should be procured by 2022. Second, the absence of specific maximum offset targets between 2025 and 2040 leaves too much room for inaction on direct reductions. The recommendations should include quantified intermediate goals for the maximum number of offsets to increase accountability and align with the Commission's emissions trajectories shown in Figure 2. These milestones would serve a similar purpose as a carbon budget, by limiting the actual emissions emitted by the University.

6. Revolving Energy Fund

The Commission recommends a $25M REF seed for the Ann Arbor campus, citing optimal economic benefits for the school. However, the goal of carbon neutrality is not solely to produce economic gains, and many energy efficiency measures supported by the REF will yield CO2 reductions at a lower cost per ton compared to other PCCN recommendations. A larger REF with appropriate additional staffing would shorten the timeline for realizing the substantial benefits of increased energy efficiency and would also support more expensive proposals, such as deeper building retrofits, which have greater long-term benefits.

7. ESG Requirements for Endowment Investments

The University of Michigan cannot consciously strive for carbon neutrality while simultaneously investing in firms, like ExxonMobil, that plan to continue increasing carbon emissions in the coming decades. To show consistency in both word and action, ESG requirements should be set for all investments made with university endowment funds, in order to more thoughtfully invest these funds in alignment with a broader mission. This will demonstrate the University's commitment to fighting climate change while also encouraging sustainability in the corporate world and enabling the University to join the ranks of institutions like Harvard that already consider ESG factors in their endowment investment decisions. Additionally, endowment funds could be reinvested within the University through a program like the REF, targeting ECM projects with predictably short paybacks and high IRRs to continue to realize the intended fund returns.

Our review committee appreciates the PCCN draft report's broad focus on different sources of emissions, as well as the recommendation to make the University a global leader in geothermal technology. Overall, however, our review committee is disappointed by the lack of ambition and follow-through shown in the PCCN draft report given the vast resources at the University's disposal and the strong collective interest of stakeholders. We know that the University community can work together to define a better path towards achieving carbon neutrality and addressing environmental justice issues, thereby enabling the University to truly become Leaders and Best on the world stage at such a crucial moment in history.

Thank you for considering our feedback,

The Energy Club at Ross PCCN Review Committee

Action Items:

1.PLEASE ADD YOUR VOICE in one of the two ways below if you agree with the recommended improvements:

a) Copy and paste the SUPPORT LETTER, indicating your support for our improvement recommendations, into the PCCN PUBLIC COMMENT PORTAL. This method is preferred, and you can simply copy and paste the Support Letter into the Public Comment Portal before 1/26. You can also expand on the support letter with any additional improvement recommendations that you would like to include.

b ) Sign this GOOGLE FORM indicating your support for our letter. We will collect the digital signatures and submit them to the PCCN before 1/26.

2. PLEASE SHARE WIDELY within your networks. It will be very helpful for the PCCN to hear from a large number of students regarding their recommendations to reach carbon neutrality.

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